Unions retreat on calls for PFI moratorium

Labour's biggest backers were preparing last night to tone down their opposition to the Government's private finance initiative (PFI).

Union leaders had been expected to give ministers a roasting on PFI at the party conference today, but they are now expected to withdraw demands for a moratorium. Instead, Labour's largest affiliates were likely to concentrate on calling for a review of the initiative, which they believe would fail the "value for money" test.

Tony Blair increased the rhetoric over private sector involvement in public services, telling the BBC's Breakfast with Frost programme that he wanted to "up the pace" of reform.

"We need to open up our public services, finding new ways to deliver them," the Prime Minister said. "We have to make the change and reform and we have to up the pace of reform, not slow it down."

Union leaders proposed the compromise to ensure maximum opposition to PFI among unions, amid fears from some unions leaders that a moratorium would lead to the suspension of work already in progress.

Dave Prentis, the general secretary of Unison, Britain's largest public service union, indicated that he was prepared to make the concession to maximise support

But a senior Labour source said: "A review is not something we would be able to live with. It would be a moratorium by another name."

Mr Prentis acknowledged that the Government had declared its intention to ignore any conference vote on the issue, but said unions were prepared to give Mr Blair "a bloody nose".

The row came as senior Labour officials were attempting to secure a long-term deal with the unions to fund the party. Party leaders want the unions to continue contributing about 30 per cent of the party's funds until 2006, and are anxious to secure agreement to stop unions cutting their payments to Labour.

The party's financial troubles are so bad that rank-and-file party members are each to be asked for a £20 donation to help cover the mortgage of the new Labour headquarters in Westminster, it was announced.

Charles Clarke, the party chairman, told members he was confident that a deal on funding would be struck.

But the party is unlikely to achieve its ambition of securing a deal during the conference week, with many union leaders reluctant to guarantee not to cut the number of affiliated members by locking themselves into a long-term funding arrangement.

Mr Clarke told delegates: "This party values the relationship between our party and the trade unions that founded it and thinks that the link is important and valuable and wants to further it."